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Media type:
E-Article
Title:
Old-Keynesianism in the New Keynesian Model
Contributor:
van der Kwaak, Christiaan
Published:
Springer Science and Business Media LLC, 2024
Published in:
De Economist (2024)
Language:
English
DOI:
10.1007/s10645-024-09437-3
ISSN:
0013-063X;
1572-9982
Origination:
Footnote:
Description:
AbstractI investigate an ‘old Keynesian’ fiscal policy in which government spending endogenously responds to inflation and the output gap when the nominal interest rate is pegged at the ZLB. I do so within a standard Representative Agent New Keynesian model (RANK), as well as a two-period Overlapping Generations New Keynesian model (OLG-NK). For both model versions, I find that the equilibrium values for inflation and the output gap under a standard Taylor rule regime can be replicated under the ‘old Keynesian’ regime. However, a unique stable countercyclical equilibrium is only feasible within the OLG-NK model and crucially depends on the pension system.